A Fast-Growing Form of Foreign Direct Investment Is Sovereign Wealth

question 164

Multiple Choice

A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs) . Why do these investments by governments with surplus cash flows worry trade experts?

• A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies.
• B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses.
• C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management.
• D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs.

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Definitions:

Double Scoop

A serving of ice cream consisting of two scoops, often of different flavors, placed together in a cone or cup.

Organic

Referring to food or farming methods that do not use artificial chemicals, GMOs, antibiotics, or hormones.

Monopoly

A market structure characterized by a single seller selling a unique product in the market.

Long Run Equilibrium

A state in which all firms in a market are earning normal profit and all inputs can be adjusted, leading to market stability.